HomeNewsCBDCSwift accelerate CBDC interoperability

Swift accelerate CBDC interoperability

Date: 18 September, 2023

Swift accelerates the development of Central Bank Digital Currencies (CBDCs) as the beta testing phase commences for an interlinking solution. Swift has progressed into a new stage of its pioneering efforts in Central Bank Digital Currency (CBDC) interoperability.
Three central banks and monetary authorities are in beta testing of Swift’s innovative CBDC connector, reflecting a rising interest in interoperability solutions. Furthermore, over 30 financial institutions worldwide are participating in the second phase of sandbox experiments to explore additional use cases. Swift has demonstrated its commitment to advancing its CBDC connector solution by initiating a beta version following an initial round of sandbox testing. Participants in the testing phase have acknowledged the solution’s “clear potential and value.”
Swift has also explored additional use cases, such as trigger-based payments for digital trade platforms, foreign exchange models, delivery vs payment systems, and liquidity-saving mechanisms. Notable participants in this expanded group of over 30 prominent institutions include the Reserve Bank of Australia, Deutsche Bundesbank, HKMA, Bank of Thailand, and CLS. It’s worth noting that the initial phase of the sandbox involved the participation of 18 central and commercial banks.
Tom Zschach, Chief Innovation Officer at Swift, remarked, “Our primary focus lies in achieving interoperability, ensuring that emerging digital currencies can harmoniously coexist with one another and with the existing fiat-based currencies and payment systems. The financial industry has already acknowledged the substantial potential of our CBDC innovations in averting digital isolation while securely connecting present and future payment systems. This subsequent phase of testing and exploration will enable us to fine-tune the solution, ensuring its maximum effectiveness, especially at scale.” 98% of global GDP, are currently exploring Central Bank Digital Currencies (CBDCs). Nevertheless, there is a concern that this widespread CBDC development, largely concentrated on domestic use cases, may lead to a fragmented landscape across international borders.
To counter this fragmentation, Swift has prioritised focus within its innovation agenda on interoperability for digital currencies and tokenised assets to enable them to seamlessly scale if and when deployed into the financial ecosystem. Its specific work on CBDCs began more than 18 months ago and, in the first phase of its experiments and sandbox testing, almost 5,000 transactions were simulated between two different blockchain networks and with existing fiat-based payment systems. Central and commercial bank participants noted that the connector enabled the seamless exchange of CBDCs, even for those built on different platforms.

References:

Swift Focuses on CBDC Interoperability as Three Central Banks Begin Beta-Testing

https://www.swift.com/news-events/news/successful-testing-paves-way-cbdc-use-cross-border

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